EUR 850.00 For Business Accounts Only

Morningstar | Hain's turnaround is unfolding slowly amid intense competition.

We believe Hain should benefit from the health trend in packaged food, beverages, and personal care once its turnaround effort simplifies the portfolio and delivers greater efficiency. The company has acquired and integrated growing brands with an efficient procurement, production, and distribution infrastructure. However, we do not believe this has translated into an economic moat.High-single-digit to low-double-digit growth in natural and organic categories over the past decade and limited offerings from established firms have created room for Hain to grow. Hain has brought its brands into outlets that have not historically seen significant natural and organic penetration, benefiting from retailers' need to respond to rising demand. However, category growth has caught the attention of larger branded and private-label producers, particularly as health-oriented offerings take share from their traditional peers. We suspect these bigger players will increase their penetration in the space and see this as the most significant threat to Hain, risking price compression versus conventional offerings, market share declines, and increased input costs (ingredient supplies are tight).Hain is managing these challenges by adding distribution, especially in conventional grocers eager to meet demand for health-focused items; however, the competitive dynamic for shelf space and share of consumer wallets is less favorable for Hain in traditional outlets.Hain has stumbled lately, with U.S. performance lagging expectations combined with an accounting investigation that kept the firm from filing results for about a year. While we are encouraged that Hain is refocusing on finding efficiencies and investing in brand equity and penetration (despite the costs, we believe the price of building engagement with Hain’s brands is lower now than it will be once competitors broaden their lineups), the diminished performance is especially concerning as it comes amid intensifying competition that magnifies the need for smaller manufacturers to avoid missteps.